Numerex Reports First Quarter 2013 Financial Results

Numerex Reports First Quarter 2013 Financial Results
Net subscriptions grew 34%, adding 148,000 during Q1, increasing base to 2.03
million
Subscriptions-based recurring revenue increases 22% year-over-year
PR Newswire
ATLANTA, May 9, 2013
ATLANTA, May 9, 2013 /PRNewswire/ -- Numerex Corp (NASDAQ: NMRX), a leading
provider of on-demand and interactive machine-to-machine (M2M) enterprise
solutions, today announced financial results for its first quarter ended March
31, 2013.
"The Company experienced continued strong subscription growth, posting a
record 148,000 net additions to its base during the quarter, and an
acceleration in subscription-based recurring revenues," stated Stratton
Nicolaides, CEO and chairperson of Numerex. "Our continued investment in our
on-demand, interactive platforms is creating traction with new and existing
enterprise customers across a number of vertical markets. We were very pleased
to have surpassed the 2 million subscription milestone during the quarter and,
as a result of a strong start in the second quarter combined with a robust
pipeline of opportunities, we are increasing our 2013 subscription growth rate
guidance to 30% to 35%. Also, we affirm our subscription-based recurring
revenue growth guidance of 18% to 23%. In addition, we expect to leverage the
investments made in engineering and development and improve our adjusted
EBITDA margins to a range of 13% to 15% for the full year 2013. Furthermore,
our significantly strengthened balance sheet allows us to pursue certain
managed services opportunities, expected to launch later this year, which we
anticipate will yield incremental subscription growth later this year and
2014."
Financial metrics for the first quarter of 2013 include:
Three Months Ended
March 31
Non-GAAP Measures 2013 2012
Adjusted EBITDA ($ millions) 1.8 1.7
Adjusted EBITDA as a percent of total revenue 10.5% 11.4%
New subscriptions (units) 148,000 83,000
Cumulative net subscriptions (units) 2,031,000 1,521,000
GAAP Measures
Recurring revenue and support ($ millions) 12.2 10.1
Gross margin – recurring revenue and support 56.3% 58.8%
Net income ($ millions) 0.0* 0.3
EPS (basic and diluted) $0.00 $0.02
*After non-recurring charges of $0.4 million
Mr. Nicolaides continued, "The first quarter was impacted by a number of
one-time costs. These costs totaled $378,000, which temporarily reduced
service margins by 2 percentages points and increased general and
administrative costs by $138,000. We expect service margins to return to a
normal run-rate for the balance of the year."
First Quarter Financial Highlights:
oThe Company added a record 148,000 net new subscriptions in the first
quarter of 2013, an increase of 78% compared to the 83,000 net new
subscriptions added in the same quarter in 2012. Total subscriptions
increased 34% to 2.0 million in the first quarter of 2013 compared to 1.5
million in the first 2012. The average cost of acquiring a net new
subscription during the quarter was $13.90 compared to $25.68 during the
same period last year, a 46% reduction in acquisition cost per
subscription.
oRecurring revenue and support of $12.2 million increased 20.0% in the
first quarter of 2013 compared to the first quarter of 2012. After
adjusting for one-time services and support revenue, subscription-based
recurring revenues increased 22%.
oGross margin generated by recurring revenue and support in the first
quarter of 2013 was 56.3% compared to 58.8% recorded in the same period in
2012. The decrease was primarily due to non-recurring carrier fees of $0.2
million and excluding these charges, recurring revenue and support gross
margins would have been approximately 58.3%. Embedded device and hardware
margin declined to 3.2% in the first quarter of 2013 compared to 18.9% in
the same period in 2012. This decline was primarily driven by promotional
discounts associated with the introduction of new products.
Continued First Quarter Financial Highlights
oTotal GAAP operating expenses for the first quarter of 2013 were $7.0
million compared to $6.4 million in the first quarter of 2012. These
expenses include depreciation and amortization (D&A) charges of $1.0
million and $0.8 million in the first quarters of 2013 and 2012,
respectively. The increase in D&A was primarily the result of amortization
associated with the acquisition completed at the beginning of October 2012
as well as amortization of additional capitalized software development
costs. During the first quarter of 2013, engineering and development costs
increased 32.0% year-over-year to support the company's growing customer
base and strengthening our Gateway as a Service (GaaS) and Portal
offerings.
oFirst quarter 2013 earnings before interest, taxes, depreciation,
amortization, non-cash compensation and one-time costs, or adjusted
EBITDA, were $1.8 million compared to $1.7 million in the first quarter of
2012. The Company reported GAAP net income for the first quarter of 2013
of breakeven compared to $0.3 million for the same period in the prior
year.
oAs of March 31, 2013, Numerex reported cash of $25.5 million and notes
payable of $1.6 million compared to $4.9 million and $8.3 million,
respectively as of December 31, 2012. The company generated positive cash
from operations for the first quarter of 2013, compared to using $0.6
million during the first quarter of 2012. During the first quarter of
2013, Numerex completed an underwritten public equity offering which
generated net proceeds of approximately $27.8 million.
First Quarter 2013 Operational Highlights:
oAnnounced that Jerry Rose, an experienced former senior executive with a
track record of driving growth in key businesses within General Electric
(GE) and United Technologies (UTC), was appointed to the Company's Board
of Directors.
oUplink Security LLC ("Uplink") and 2GIG Technologies announced an
agreement for Uplink to offer cellular and interactive remote services for
2GIG alarm systems. This will enable alarm dealers to sell systems
featuring Uplink's nationwide cellular communications as well as remote
services consisting of event notifications to end-users, viewing of live
or recorded video, and smart-phone control of the alarm system,
thermostats, lighting, locks and other home control features.
oAnnounced the acquisition of certain assets, technology, and intellectual
property – including a portfolio of patents - that will support and widen
its M2M platform capabilities in real-time monitoring of critical assets
and events.
oNumerex and Cascade Engineering announced their collaboration for the
development and implementation of an asset management solution for the
solid waste and recycling market.
oAnnounced an extensive collaboration with Sentaca, a leading, niche
supplier of strategic consulting, services & innovation to the
international telecoms industry, headquartered in the United Kingdom.
Nicolaides concluded, "We enter the second quarter with strong momentum driven
by the introduction of new products and the commercialization and launch of
several solutions to a broad range of customers through our horizontal
platforms. Numerex is in position to extend its leadership position in M2M
and remains committed to growing our subscription base that generates our
high-margin recurring service revenue."
Quarterly Conference Call
Numerex will discuss its quarterly results via teleconference today at 9:00
a.m. Eastern Time. Please dial (877) 641-0093 or, if outside the U.S. and
Canada, (904) 520-5773 to access the conference call at least five minutes
prior to the 9:00 a.m. ET start time. A live webcast and replay of the call
will also be available at http://www.numerex.com under the Investor Relations
section. An audio replay will be available via the Numerex web site beginning
two hours after the call end. You can also listen to a replay of the call by
dialing (888) 284-7564 or (904) 596-3174 if outside the U.S. and Canada and
entering code number 2981911511.
About Numerex
Numerex Corp (NASDAQ: NMRX) is a leading provider of interactive and on-demand
machine-to-machine (M2M) technology and service, offered on a subscription
basis, used in the development and support of M2M solutions for the enterprise
and government markets worldwide. The Company offers Numerex DNA® that may
include hardware and smart Devices, cellular and satellite Network services,
and software Applications that are delivered through Numerex FAST® (Foundation
Application Software Technology). In addition, business services are offered
to enable the development of efficient, reliable, and secure solutions while
accelerating deployment. Numerex is ISO 27001 information security-certified,
highlighting the Company's focus on M2M data security, service reliability,
and round-the-clock support of its customers' M2M solutions. For additional
information, please visit www.numerex.com.
This press release contains, and other statements may contain, forward-looking
statements with respect to Numerex future financial or business performance,
conditions or strategies and other financial and business matters, including
expectations regarding growth trends and activities. Forward-looking
statements are typically identified by words or phrases such as "believe,"
"expect," "anticipate," "intend," "estimate," "assume," "strategy," "plan,"
"outlook," "outcome," "continue," "remain," "trend," and variations of such
words and similar expressions, or future or conditional verbs such as "will,"
"would," "should," "could," "may," or similar expressions. Numerex cautions
that these forward-looking statements are subject to numerous assumptions,
risks and uncertainties, which change over time. These forward-looking
statements speak only as of the date of this press release, and Numerex
assumes no duty to update forward-looking statements. Actual results could
differ materially from those anticipated in these forward-looking statements
and future results could differ materially from historical performance.
The following factors, among others, could cause actual results to differ
materially from forward-looking statements or historical performance: our
inability to reposition our platform to capture greater recurring service
revenues; the risks that a substantial portion of our revenues are derived
from contracts that may be terminated at any time; the risks that our
strategic suppliers materially change or disrupt flow of products and/or
services; variations in quarterly operating results; delays in the
development, introduction, integration and marketing of new machine-to-machine
(M2M) products and services; customer acceptance of services; economic
conditions resulting in decreased demand for our products and services; the
risk that our strategic alliances and partnerships and/or wireless network
operators will not yield substantial revenues; changes in financial and
capital markets, and the inability to raise growth capital; the inability to
attain revenue and earnings growth in our data business; changes in interest
rates; inflation; the introduction, withdrawal, success and timing of business
initiatives and strategies; competitive conditions; the inability to realize
revenue enhancements; and extent and timing of technological changes. Numerex
SEC reports identify additional factors that can affect forward-looking
statements.
-continued-
Numerex Corp.
Unaudited Condensed Consolidated Statement of Operations
(In thousands, except per share data)
Three Months Ended
March 31, 2013 vs 2012
2013 2012 $ %
Net revenues:
Recurring revenue and support $ $ $ 2,063 20%
12,171 10,108
Embedded devices and hardware 4,559 4,424 135 3%
Total net revenues 16,730 14,532 2,198 15%
Cost of recurring revenue and 5,320 4,161 1,159 28%
support
Cost of embedded devices and 4,415 3,588 827 23%
hardware
Gross Profit 6,995 6,783 212 3%
41.8% 46.7% - -
Sales and marketing expenses 1,976 2,072 (96) -5%
General and administrative 2,911 2,688 223 8%
expenses
Engineering and development 1,063 805 258 32%
expenses
Depreciation and amortization 1,017 815 202 25%
Operating income 28 403 (375) -93%
Interest expense 89 77 12 16%
Other (income) expense (7) 3 (10) nm
(Loss) earnings before income (54) 323 (377) nm
taxes
(Benefit) provision for income (65) 2 (67) nm
tax
Net income $ $ $ (310) -97%
11 321
Basic earnings per common $ $
share 0.00 0.02
Diluted earnings per common $ $
share 0.00 0.02
Weighted average common shares
used in per share calculation
Basic
17,661 15,189
Diluted 18,353 15,872
nm – not meaningful
NUMEREX CORP.
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31,
2013 2012
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ $
25,471 4,948
Accounts receivable, less allowance for 8,951 9,381
doubtful accounts of $455 and $383
Financing receivables, current 633 512
Inventory net of provision of $392 and $362 8,207 7,503
Prepaid expenses and other current assets 2,532 1,511
TOTAL CURRENT ASSETS 45,794 23,855
Property and equipment, net of accumulated
depreciation
and amortization of $1,323 and $1,185 2,548 2,450
Software, net of accumulated amortization of 5,096 4,506
$2,113 and $1,848
Other intangibles, net of accumulated 6,817 6,154
amortization of $11,982 and $11,689
Other assets, non-current 2,680 2,698
Financing receivables, non-current 1,593 1,329
Deferred tax assets 4,852 4,788
Goodwill 26,367 26,367
TOTAL ASSETS $ $
95,747 72,147
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ $
6,720 7,679
Other current liabilities 1,694 866
Current portion of long term debt 528 2,286
Deferred revenues 2,309 1,824
Obligations under capital leases, current 264 -
TOTAL CURRENT LIABILITIES 11,515 12,655
LONG TERM LIABILITIES
Note payable, long term 1,109 6,008
Obligations under capital leases, long-term 430 -
Other long term liabilities 871 679
TOTAL LIABILITIES 13,925 19,342
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized - -
3,000; none issued
Class A common stock, no par value;
authorized 30,000; 19,549 and 17,171 issued;
18,383 and 15,609 outstanding - -
Class B common stock, no par value; - -
authorized 5,000; none issued
Common stock issuable 925 -
Additional paid-in-capital 93,273 68,072
Treasury stock, at cost; 1,241 and 1,562 (5,239) (8,136)
shares
Accumulated other comprehensive loss (25) (8)
Accumulated deficit (7,112) (7,123)
TOTAL STOCKHOLDERS' EQUITY 81,822 52,805
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ $
95,747 72,147
Reconciliation of Non-GAAP net income
The following table reconciles non-GAAP financial measures to the most
directly comparable financial measures prepared in accordance with Generally
Accepted Accounting Principles in the United States of America (GAAP). These
non-GAAP financials use net earnings before non-cash items and one time costs
as an additional measure of our operating performance.
Non-GAAP financial measures should not be considered as a substitute for, or
superior to, GAAP financial measures, which should be considered as the
primary financial metrics for evaluating our financial performance.
Significantly, non-GAAP financial measures are not based on a comprehensive
set of accounting rules or principles. Instead, they are based on subjective
determinations by management designed to supplement our GAAP financial
measures. They are subject to a number of important limitations and should be
considered only in conjunction with our consolidated financial statements
prepared in accordance with GAAP. Accordingly, investors should exercise
caution when evaluating our non-GAAP financial measures.
Despite these limitations, we believe our non-GAAP financial measures provide
meaningful supplemental information about our operating results, primarily
because they exclude non-cash items that we do not believe are indicative of
the ongoing operating performance of our business. Although these items should
properly be considered in our GAAP financial measures, we believe they should
be excluded when evaluating our current operating performance.
The following table reconciles the specific items excluded from GAAP in the
calculation of Adjusted EBITDA for the periods indicated below:
Reconciliation of Non-GAAP Measures
Three Months Ended
March 31,
2013 2012
(unaudited)
Net income (loss) $ 11 $ 321
Depreciation and amortization 1,017 815
Interest expense and other, net 82 80
Income tax (65) 2
EBITDA $ 1,045 $ 1,218
Non-cash compensation 339 432
One time costs* 378 -
Adjusted EBITDA $ 1,762 $ 1,650
*One-time costs include non recurring carrier charges, acquisition costs and
travel expenses incurred as a result of the capital raise.
Numerex Corp. Contact:
Alan Catherall
770 485-2527
Investor Relations Contact:
Seth Potter
646 277-1230
SOURCE Numerex Corp
Website: http://www.numerex.com